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erastova [34]
3 years ago
14

What is the net present value of a project that has an initial cash outflow of $7,670 and cash inflows of $1,280 in year 1, $6,9

80 in year 3, and $2,750 in year 4? the discount rate is 12.5 percent?
Business
1 answer:
goldfiish [28.3K]3 years ago
6 0
<span>Net present value is the present value of future cash inflows discounted at the expected rate of return minus the initial investment.
 Initial cash outflow = $7670
Cash inflow during Year 1 = $1280
Cash inflow during Year 2 = $0
Cash inflow during Year 3 = $6980
Cash inflow during Year 4 = $2750

Discount rate = 12.5%

NPV = (1280/1.125^1)+(0)+(6980/1.125^3)+(2750/1.125^4)-7670
NPV = (1280/1.125)+0+(6980/1.424)+(2750/1.6)-7670
NPV = 1137.778+0+4902.277+1716.811-7670
NPV=86.86</span>
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